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General Motor Co's underfunded pension plan has found a buyer for its illiquid private equity assets - the Chinese government, which is willing to pay between $1.5 billion and $2 billion, the Financial Times reported on its website.

China, which holds close to $1.2 trillion in U.S. treasuries, has been looking to capitalize on the liquidity concerns of assets managers such as pension funds amid financial market volatility by snapping up their assets.

GM's pension plan owns stakes in some of the most high-profile private equity funds in the United States and Europe, including the Carlyle Group LP, the Blackstone Group LP and CVC Capital Partners Ltd, the FT reported.

The as yet uncompleted sale would involve the transfer by GM adviser Performance Equity Management LLC of stakes to the State Administration of Foreign Exchange (Safe), which manages China's more than $3 trillion in foreign exchange reserves.

The newspaper added that Lexington Partners LLC is advising Safe on the deal.

GM declined to comment, Lexington Partners did not respond to a request for comment and Safe could not immediately be reached for comment.

The FT quoted an investment adviser as saying the deal was discreet, even by private equity standards, because "there is clearly concern about selling U.S. assets to China, especially in an election year."

Private equity, the industry in which Republican Presidential hopeful Mitt Romney spent two decades of his life, as well as U.S relations with China, particularly with regards to trade and the outsourcing of jobs, have emerged as hot political issues in this year's campaign for the White House.

The sale of assets by GM's pension plan to China could fuel such political debate further. President Barack Obama's re-election campaign has touted GM's $50 billion bailout in 2009 as one of his major accomplishments.

GM's underfunded pension liability represents one of the two largest risks to the company next to its troubled European unit, Opel. The automaker has $109 billion in assets in its global pension plan. Its obligations add up to $134 billion.

Pension funds and other institutional investors lock up their money for an average of 10 years when they invest in private equity. To exit these investments, they have to find someone willing to buy their private equity fund stakes, which could have gone up or down in value.

109 Billion in assets and 134 billion in obligations? Glad I don't work for GM. I suppose someone will bail out the pension fund, too.